Thursday, December 12, 2002

All tax cuts are not created equal
Oddly, it's the tax cuts that Democrats favor that many Wall Streeters want to see most just now.
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What Wall Street would like, ideally, is for the economy to be growing at a steady clip while Washington simultaneously chips away at the deficit. Wall Street would also like a pony.
Since Wall Street can't get all those things, it will settle for action that will get the economy going. There are, broadly speaking, two ways the government could try to do that: kick up spending, or cut taxes, the latter being preferred by both the dominant Republicans and by Wall Street.
Breaking it down further, there are two kinds of tax cuts. Some are meant to streamline the tax code, making sure it doesn't, for instance, take away people's incentive to work harder and earn more. Other tax cuts have shorter scopes, and are aimed chiefly kick-starting the economy.
It's that second kind of cut that Wall Streeters think is especially needed now. And if you want to see a tax-cut dollar put into the economy, the thinking goes, you don't give it to somebody like Bill Gates, who isn't likely to up his spending (he's already got everything he needs). Give it instead to middle- or lower-income households, the argument goes -- ironically, exactly the kind of cuts most likely to be championed by Democrats.

As I have said before, demand side economic policy is not anti-business since most in the business class understand that it is demand that ultimately drives the economy. The Democrats need to get behind the Stabenow message. They need to change the argument from one about whether there should or should not be tax cuts and put the emphasis on who should get them.